Hotel & Motel Management / April 6, 1998
By Larry Luxner
SAN JUAN, Puerto Rico -- From Caracas to Cancun, tourist destinations throughout the Caribbean are using slot machines and casino gambling as drawing cards to lure foreign visitors to their shores -- though church opponents have managed to put the brakes on casinos in more than a few islands.
Earlier this year, the Venezuelan government legalized casinos, but restricted them generally to five-star hotels of at least 200 rooms each. The law imposes a 10 percent direct tax on gross revenues for casinos and 21 percent for bingo halls; the levy is calculated on total revenues, excluding gambling payouts. It also states that the sum allocated as prize money cannot be less than 70 percent of total net revenues.
James Gagda, a Washington attorney and an expert in regional gambling issues, says "Venezuela, with its new casino law, represents an excellent prospect for the gaming industry."
In fact, the legalization of casinos may even help the government sell at least one state-owned resort, the Hotel Humboldt. This 70-room hotel -- the one exception to Venezuela's 200-room minimum for casinos -- overlooks Caracas from the summit of Mount Avila. Since the 1980s, the abandoned hotel has been owned by the Venezuelan Investment Fund, which now wants to sell it off.
"Most prospective investors have made passage of the new law a prerequisite for bidding," says the U.S. Embassy in Caracas. "Since the hotel's capacity is small, it will need the additional attraction of the casino to become profitable."
In Puerto Rico -- where gambling has been a mainstay of the island's tourism industry for years -- the Legislature recently passed a casino law which, for the first time ever, allows 24-hour operation of casinos. It also permits hotels to offer liquor and live entertainment in casinos, and to advertise their casinos locally.
Most importantly, it allows hotels to own the slot machines and "to use their judgement in buying the machines that'll bring in the most revenue," says Jorge Pesquera, executive director of the Puerto Rico Convention Bureau. In addition to the new law, Puerto Rico's hotel room tax was raised from 7 to 9 percent for non-casino hotels, and from 9 to 11 percent for hotels with casinos. Pesquera says the measure directs 25 percent of the additional revenues toward marketing efforts for San Juan's planned Isla Grande Convention Center.
"The Tourism Company will continue to regulate the casinos," explains Pesquera. "Inspectors will remain on the government payroll, but the attendants and technicians will now become part of the private sector."
Jaime L. Gonzalez, vice-president of the Hotel Development Corp., a subsidiary of the state-run Puerto Rico Tourism Co., says the current government's focus on attracting group tourism and encouraging casino development is a relatively new phenomenon.
"The role of gaming has always been downplayed in Puerto Rico," he said. "Hotels were only built so that corporate executives would have a nice play to stay when exploring new investments and visiting their plants. Tourism was not encouraged." He adds that the island's new casino "will make the industry more competitive."
Nevertheless, one of Puerto Rico's oldest and most prestigious casinos -- the one at the 670-room Caribe Hilton Hotel, built in 1949 -- closed its doors on Oct. 15. Manager Raul Bustamante said the casino had been losing money since 1990, and that it would be more profitable to turn the 10,000-square-foot space into banquet facilities.
"People now take shorter vacations and spend their money differently," said Bustamante, who's also president of the Puerto Rico Hotel & Tourism Association. In fact, a 1996 study by the Arthur Andersen consulting firm showed that the island's 11 casinos suffered a steep decline in gross operating earnings, from $8.51 million in 1993 profits to a $108,668 loss in fiscal 1996.
While opposition to casino gambling is negligible in Puerto Rico, that's not the case in other Caribbean islands.
Sun International of South Africa, for example, hopes to turn the Bahamas into the "Monte Carlo of the Caribbean," with the development of a $17.5 million marina at its Paradise Island resort casino. Chairman Sol Kerzner says construction will start at the end of 1998, following the $450 million expansion of the Atlantis resort and casino on Paradise Islands.
Yet the Bahamas Christian Council is urging the government to stop granting casino licenses. In late November, the council also called upon foreign investors to "cease from trying to tempt any Bahamian government in this direction now or in the future." The council's appeal followed announcements that new casino licenses would be approved for the islands of Bimini, Grand Bahama and Exuma, along with proposed developments.
The religious group suggests that instead of more casinos, more emphasis could be placed on the Bahamas' fishing industry and agriculture for job creation. Three casinos are currently operating in the Bahamas.
Meanwhile, hoteliers in St. Lucia are asking their government to give serious consideration to the introduction of casino gambling at island hotels. Tourist Board Director Agnes Francis says exit surveys often show that one of the biggest complaints is the lack of nightlife and entertainment for visitors. Newly elected Prime Minister Kenny Anthony says the casino issue should be decided upon in consultation with the people of St. Lucia.
But that's not likely to happen in Jamaica, one of the Caribbean's most popular tourist destinations. Prime Minister Percival J. Patterson -- who last week was re-elected to an unprecedented third term for his party -- said the Jamaican government will not consider legalizing casino gambling anytime soon.
Tourism Minister Francis Tulloch voiced his personal support for casinos in June, and pledged to have government "revisit" the matter. One developer, Lagoon Development Co., is building a $60 million entertainment complex in Montego Bay, and are hoping to have a casino as a centerpiece of the project.
Yet successive Jamaican governments -- influenced by a powerful church-led anti-gambling lobby -- have shied away from legalizing casinos, although numerous gambling machines are allowed in hotels and entertainment centers.
Meanwhile, in the Dominican Republic -- already home to some of the world's leading phone-sex companies -- is establishing itself as a capital for gambling via 800 telephone numbers over the Internet, says Miami-based Offshore Alert.
With annual licenses running from $20,000 to $100,000, several Caribbean islands are looking to the sector as a lucrative revenue earner. Philadelphia-based gaming consultant Joe Gallagher says Santo Domingo is home to 60 or 70 of the 100 or so companies now offering telephone or electronic gambling services offshore.
"The initial operations were set up in the early 1990s by people who had been running illegal sports books from within the U.S.," he said. "Now they've shown the potential to make money legitimately through offshore gambling, serious investors are taking a look at it."